The Current State of the US Auto Market

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It's the next downturn that will really tell who is operating more successfully among all the makes.

That's certainly a valid point, although Buffett tends to be a longer term trader. Maybe on this one he's just looking at a trading opportunity though. However, GM shed a lot of crap off it's balance sheet in the BK and buffed up it's liquidity, so I'd almost be more concerned about Ford in that scenario right now. But unless the next downturn is severe, I think both will handle it much better than the recent distress.

Well, for GM, it isn't black and white that their pricing strategy helped in the recent quarter:

During the fourth quarter, costs rose by $US400 million in North America, GM's most profitable region. But combined vehicle pricing fell by $US300 million there as the company offered incentives to cut through its inventory of trucks on dealer lots ahead of its introduction of redesigned versions this year.

It was the first drop in North American pricing for GM since the first quarter of 2011.

Jefferies' Nesvold said the weaker Japanese yen and the deteriorating European market would probably lead to more competitive pricing in North America.

That would continue the trend seen in the fourth quarter, when GM lost one per centage point of US market share despite raising its incentives slightly, according to research firm TrueCar.com.

No doubt that GM is a hard one to get your hands around as an investor. Does North America get into consolidation down the road? Do gas prices really go down in a few years helping higher margin truck and crossover sales where GM is a big player? Does a foreign, maybe Chinese firm make a buyout try for GM? As for Europe, there are several ways to look at it. That market looks ripe for consolidation because the government's probably can't keep carrying unprofitable, marginal brands while their economy's are in stress. It doesn't seem clear where they are in the business cycle either. For example, one of the reasons the Oakmark International Fund has done so well recently is that it made an unpopular, but successful bet that European banks were near the bottom. Could that be happening to the automakers down the road over there and the car market? If so, who benefits most; European factories or Asians? Warren Buffett made his fortune as a value investor, so I'd suspect he thinks GM is going to turn around. Remember that value investors (as opposed to growth) tend to buy early when things are ugly and are more willing to use patience and hold a stock.

Incidentally, when he first bought into railroads some investors proclaimed he was making a mistake and it took several years to pan out. But man, did it pan out! Personally, I respect Buffett and I'm a fan. But I also tremendously respect him. Not just as an investor, but as a person. There are a lot of wealthy people like him that aren't loud mouth, ostentatious and obnoxious. Buffett lives a quiet life style and is a generous contributor to charitable causes.

Who really knows what will happen with gasoline prices. There are more than a few economists and investors that think we're nearing a top this year and then prices will come down due to fuel efficiency increasing along with production. I haven't a clue what will really happen. I tend to use $5/gallon when I'm considering them.

The LED fogs are a little garish given how sedate the sedan is in general, but other than that, it's not bad looking, could be a real sleeper. Frankly, I'd say make a V6 version and dump the planned Impala entirely.

Is the platform being imported from Australia like the G8, and GTO was? If so, I know it was expensive for GM to bring those cars over, so I if they are doing something similar with the SS, a lower cost, high production model could be cost prohibitive. I'd think it comes down to where it's being built.

The industry usually sees a surge of fleet sales in the first quarter, but so far this year it is a different story. Fleet efforts by the Detroit 3 and Nissan were subdued in January, while Toyota and Hyundai-Kia made the only aggressive moves.

Among the major automakers, fleet sales rose 4 percent in January to 179,000 units, dwarfed by a 19 percent surge in retail volume.

We are in an upswing in the U.S. car market. Yes, things are good. This cannot be sustained however. GM/Ford better take advantage and use this surge and momentum to their advantage. Keep up the product and innovation. I am a Ford fan, have owned mostly Ford products for over 35 years. However, I know Ford is known for coming out with great vehicles then letting them die on the vine. If a Ford representative reads these forums, they must pay attention to the consumer and keep developing and evolving their products. Other wise Ford could end up like Mercury, AMC, Pontiac or soon to be Suzuki..

Just reading for fun, not trying to pick a fight, but what is def of useable back seat? I've got an S5 & the back is useable to set a bag. I'm 6'1" & wife is 5'9". Not too much above avg, & if we put our hands behind our seats, they touch both the back of the front seats & the front of the back. Very tight. Had one rear passenger, once. Not pretty. Love the car, back seat pointless imo.

Although automakers continue to focus on shifting their production facilities to new regions driven by cost and demand factors, developing the supplier networks remains one of the greatest challenges faced by them. Existing suppliers to automakers often lack the financial strength to expand capacity in new markets. On the other hand, auto parts suppliers are sensitive to technology transfers to local third parties, which can give rise to low-cost competitors.

Since 1999, more than 20 of the largest global auto parts suppliers have filed for bankruptcy. The financial condition of the majority of auto market suppliers continues to deteriorate, resulting from a historically weak demand and high dependence on automakers.

Thus, despite the government&#146;s sizable investment in the industry, it is likely that there will be auto parts suppliers who are unable to restart operations due to a lack of sufficient working capital even as automakers start production. According to the Original Equipment Suppliers Association, 12% of the auto industry suppliers do not have sufficient working capital to support a 10%&#150;25% expansion in production.

High dependence on automakers makes the auto market suppliers vulnerable to several maladies, primarily pricing pressure and production cuts. Pricing pressure from automakers constricts parts suppliers&#146; margins. On the other hand, production cuts by automakers driven by frequent market adjustments negatively affect their operations.

Some of the auto industry suppliers who have a high reliance on a few automakers such as General Motors, Ford, Chrysler and Volkswagen include American Axle and Manufacturing (AXL), Meritor Inc. (MTOR - Analyst Report), Goodyear Tire and Rubber Co. (GT - Analyst Report), Magna International (MGA - Analyst Report), Superior Industries (SUP - Analyst Report), Tenneco Inc. (TEN - Analyst Report) and TRW Automotive (TRW).

Since November 2009, Toyota recalled about 20 million vehicles globally, surpassing all other automakers. Few months back, the automaker had announced a major worldwide recall of 7.43 million vehicles that included more than a dozen models manufactured between 2005 and 2010. The recall was related to faulty power window switches in the vehicles that can cause fire because they did not have grease applied properly during production.

In 2012, the Transportation Department of U.S. slapped a fine of $17.35 million on Toyota due to late response regarding a defect in its vehicles to safety regulators as well as late recall of those vehicles. According to the department, it was the maximum allowable fine under the law for not initiating a recall in a timely manner. The latest fine adds to $48.4 million imposed by the U.S. government on the company in 2010 due to late recall of millions of defective vehicles.

Toyota would also need to pay $1.1 billion to settle a class-action lawsuit related to complaints of unintended acceleration in its vehicles. According to a plaintiff lawyer, the settlement is one of the largest in a lawsuit in the history of automotive industry. The lawsuit blamed Toyota&#146;s defective electronic throttle-control system rather than floor mats and sticky accelerator pedals for unintended acceleration, resulting in a crash. The settlement would pacify 16 million owners of Toyota, Lexus and Scion of model years 1998 to 2010.

In the spate of recalls following Toyota&#146;s, other automakers&#146; recalls also came into the limelight. They include Chrysler, Ford, GM, Honda and Nissan. Among them, GM recalled most frequently.

But there was a lot going on behind the scenes and some of it wasn't legal. In fact, some areas of the Japanese auto-parts business were rife with bid rigging and collusion, according to confessions by companies and executives to antitrust officials around the globe that have produced multimillion-dollar fines and a dozen prison sentences."